Fear of paying into the ORPP may delay retirement plans; Meridian Study Reveals
TORONTO, Oct. 2, 2014 /CNW/ - Ontario small business owners are feeling vulnerable to the introduction of the Ontario Retirement Pension Plan (ORPP), according to new data released by Meridian, Ontario's largest credit union. Meridian's 2014 Small Business Banking in Ontario Study conducted by Leger revealed that more than three quarters (77 per cent) of Ontario small business owners believe that managing the introduction of the ORPP could be their biggest business challenge to date. Further, 41 per cent see the ORPP as a barrier to their business growth in 2015, second only to economic uncertainty (60 per cent).
"Ontario is home to more than one-third of small businesses in Canada that employ nearly three million people," says Jeff Brown, Vice President, Small Business at Meridian. "While these small business owners have weathered many storms since the recession, being prepared for the unexpected has been the key to their success. That approach will ultimately help them address the implications of the ORPP once it comes into effect in 2017.
Introduced earlier this year by the provincial government, the ORPP is a mandatory provincial pension plan intended to complement the Canadian Pension Plan (CPP) to help Ontarians save for retirement. Under the plan, employers would match an employee's contributions of 1.9 per cent per year in earnings up to a $90,000 income maximum. Employees already participating in a similar workplace pension plan and those working in federally regulated industries are exempt from contributing to the ORPP.
Small business owners support helping their employees, but fear the implications. Although 61 per cent of small business owners agree that they would be in favour of the ORPP if they themselves were employees, a large majority (91 per cent) express concern about the ORPP chipping into their profits. In fact, half of small business owners surveyed do not feel their businesses can remain at their current capacity while contributing to the ORPP.
Despite concerns, the ORPP does not have to derail retirement plans for small business owners.
According to the survey, one-half of Ontario small business owners report that they feel responsibility for helping their employees build their nest eggs (51 per cent). Yet at the same time, 61 per cent of small business owners worry that the implementation of the ORPP may negatively impact their own retirement plans.
"With a large number of small business owners in Ontario approaching retirement, it is going to become even more critical for them to understand how to best navigate the ORPP in order to reach their own retirement goals," explains Brown.
Managing cash flow is a critical aspect of running a small business and understanding how to minimize the impact of the ORPP will be vital to the health of these businesses. According to the study small business owners do see the value of expert advice with nearly two-thirds of Ontario small business owners (64 per cent) citing they will likely seek the advice of a professional when it comes time to implement the ORPP.
Brown continues, "There may be a number of options available to small business owners in Ontario that would effectively reduce the impact of the ORPP. In fact, it may be more cost-effective to offer employees a different type of pension plan, such as a Pooled Registered Pension Plan or Group RRSP, rather than sign up for the ORPP. This is where the expertise of small business advisors is most valuable – to help business owners explore and assess their options."
Additional Key Findings:
- Ontario small business owners who expect a decline in business in 2015 are significantly more likely than those forecasting growth to have highlighted the ORPP as a barrier to staying on track.
- Looking forward to 2015, 43 per cent of small business owners intend to hire more employees, compared to only 25 per cent that planned to hire this year.
- Looking forward to 2015, 75 per cent of small business owners expect their business to grow in 2015.
About the Survey:
The 2014 Small Business Banking in Ontario survey was conducted with 300 small business owners in Ontario in August 2014. A mixed methodology of phone and online surveys was used. A probability sample of the same size would yield a margin of error +/- 5.7%, 19 times out of 20.
With over 70 years of banking history, Meridian is Ontario's largest credit union, helping to grow the lives of its more than a quarter of a million Members, including over 19,000 business Members. Meridian has $10 billion in assets under management and delivers a full range of financial services online, by phone, by mobile and through a network of 65 branches and 7 business centres. Meridian Members also have access to THE EXCHANGE® Network, with more than 2,500 no-fee ABMs across Canada and 360,000 ABMs in the United States. For more information, please visit: meridiancu.ca.
 According to Meridian's 2013 Small Business Banking in Ontario survey, only 25 per cent of small business owners planned to hire in 2014.
Image with caption: "Meridian’s 2014 Small Business Banking in Ontario Study revealed more than 75% of Ontario small business owners believe that managing the introduction of the ORPP could be their biggest business challenge to date. (CNW Group/Meridian Credit Union)". Image available at: http://photos.newswire.ca/images/download/20141002_C1580_PHOTO_EN_6221.jpg
SOURCE: Meridian Credit Union
For further information: Diane Medeiros, Manager, Media and Stakeholder Relations, Office: (416) 597-4444 ext. 2667, Email: [email protected]